Question 1

According to the monetary/nonmonetary method,monetary balance sheet accounts include

Accepted Answer

A) for example,cash,marketable securities,accounts receivable,notes payable,accounts payable of a foreign subsidiary. 
B) for example,stockholders' equity and long term debt. 
C) for example,inventory paid for in cash,but not working capital. 
D) COGs,Sales,Net Income. 
A) for example,cash,marketable securities,accounts receivable,notes payable,accounts payable of a foreign subsidiary. 
B) for example,stockholders' equity and long term debt. 
C) for example,inventory paid for in cash,but not working capital. 
D) COGs,Sales,Net Income.

Question 2

The "functional currency" is defined in FASB 52 as

Accepted Answer

A) the currency of the primary economic environment in which the entity operates. 
B) the currency in which the MNC prepares its consolidated financial statements. 
C) a currency that is not the parent firm's home country currency. 
D) the currency in which the MNC prepares its consolidated financial statements,as well as a currency that is not the parent firm's home country currency. 
A) the currency of the primary economic environment in which the entity operates. 
B) the currency in which the MNC prepares its consolidated financial statements. 
C) a currency that is not the parent firm's home country currency. 
D) the currency in which the MNC prepares its consolidated financial statements,as well as a currency that is not the parent firm's home country currency.

Question 3

What does it mean to have redenominated an asset in terms of the dollar?

Accepted Answer

A) You have undertaken a hedging strategy that gives the asset a constant dollar value. 
B) Multiply the foreign currency value of the asset by the spot exchange rate. 
C) Undertaken accounting changes to eliminate translation exposure. 
D) none of the options 
A) You have undertaken a hedging strategy that gives the asset a constant dollar value. 
B) Multiply the foreign currency value of the asset by the spot exchange rate. 
C) Undertaken accounting changes to eliminate translation exposure. 
D) none of the options

Question 4

Translation exposure refers to

Accepted Answer

A) accounting exposure. 
B) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency,as a result of exchange rate change fluctuations,when viewed from the perspective of the parent firm. 
D) all of the options 
A) accounting exposure. 
B) the effect that an unanticipated change in exchange rates will have on the consolidated financial reports of an MNC. 
C) the change in the value of a foreign subsidiaries assets and liabilities denominated in a foreign currency,as a result of exchange rate change fluctuations,when viewed from the perspective of the parent firm. 
D) all of the options

Question 5

A balance sheet hedge seeks to

Accepted Answer

A) eliminate any mismatch of net assets and net liabilities denominated in the same currency. 
B) transfer accounting exposure to transaction exposure. 
C) create cumulative translation adjustment. 
D) none of the options 
A) eliminate any mismatch of net assets and net liabilities denominated in the same currency. 
B) transfer accounting exposure to transaction exposure. 
C) create cumulative translation adjustment. 
D) none of the options

Question 6

The generally accepted method for consolidating the financial reports of an MNC from the 1930s to 1975 was the

Accepted Answer

A) current/noncurrent method. 
B) monetary/nonmonetary method. 
C) temporal method. 
D) current rate method. 
A) current/noncurrent method. 
B) monetary/nonmonetary method. 
C) temporal method. 
D) current rate method.

Question 7

Using the temporal method,monetary accounts,such as cash,

Accepted Answer

A) are not translated. 
B) are translated at the average exchange rate prevailing over the reporting period. 
C) are translated at the current forward exchange rate. 
D) are translated at the current spot exchange rate. 
A) are not translated. 
B) are translated at the average exchange rate prevailing over the reporting period. 
C) are translated at the current forward exchange rate. 
D) are translated at the current spot exchange rate.

Question 8

When determining the functional currency,

Accepted Answer

A) if the sales prices for the foreign entity's products are generally not responsive on a short-term basis to exchange rate changes,but are determined more by local competition and government regulation,the local currency should be the functional currency. 
B) if there is an active local market for the foreign entity's products the local currency should be the functional currency. 
C) if factor of production costs for the foreign entity are primarily,and on a continuing basis,costs for components obtained from the parent's country the function currency should be the home currency. 
D) all of the options 
A) if the sales prices for the foreign entity's products are generally not responsive on a short-term basis to exchange rate changes,but are determined more by local competition and government regulation,the local currency should be the functional currency. 
B) if there is an active local market for the foreign entity's products the local currency should be the functional currency. 
C) if factor of production costs for the foreign entity are primarily,and on a continuing basis,costs for components obtained from the parent's country the function currency should be the home currency. 
D) all of the options

Question 9

When exchange rates change,the value of a foreign subsidiary's assets and liabilities that are denominated in a foreign currency change

Accepted Answer

A) when they are viewed from the perspective of the subsidiary firm. 
B) when they are viewed from the perspective of the parent firm. 
C) but this is only of material concern if the parent firm is liquidating the subsidiary in a bankruptcy and is forced to realize the value of the assets and liabilities at the current exchange rate. 
D) none of the options 
A) when they are viewed from the perspective of the subsidiary firm. 
B) when they are viewed from the perspective of the parent firm. 
C) but this is only of material concern if the parent firm is liquidating the subsidiary in a bankruptcy and is forced to realize the value of the assets and liabilities at the current exchange rate. 
D) none of the options

Question 10

The difference between accounting exposure and translation exposure is that

Accepted Answer

A) translation is about going from one language to another,accounting is just about the numbers. 
B) accounting exposure and translation exposure are the same thing. 
C) hedging one always involves increasing the other. 
D) hedging one might involve increasing the other. 
A) translation is about going from one language to another,accounting is just about the numbers. 
B) accounting exposure and translation exposure are the same thing. 
C) hedging one always involves increasing the other. 
D) hedging one might involve increasing the other.

Question 11

The extent to which the value of the firm would be affected by expected changes in the exchange rate is

Accepted Answer

A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the options 
A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the options

Question 12

The simplest of all translation methods to apply is

Accepted Answer

A) current/noncurrent method. 
B) monetary/nonmonetary method. 
C) temporal method. 
D) current rate method. 
A) current/noncurrent method. 
B) monetary/nonmonetary method. 
C) temporal method. 
D) current rate method.

Question 13

The International Accounting Standards Committee

Accepted Answer

A) is now known as The International Accounting Standards Board. 
B) is charged with accounting standards at the International House of Pancakes. 
C) includes many convicted felons among its members. 
D) all of the options 
A) is now known as The International Accounting Standards Board. 
B) is charged with accounting standards at the International House of Pancakes. 
C) includes many convicted felons among its members. 
D) all of the options

Question 14

In highly inflationary economies,FASB 52 requires that the foreign entities financial statement be remeasured from the local currency "as if the functional currency were the reporting currency." The purpose of this requirement is

Accepted Answer

A) to prevent large important balance sheet accounts,carried at historical values,from having insignificant values once translated into the reporting currency at the current rate. 
B) to prevent games playing in the accounting books. 
C) to prevent having to restate the books at a later date. 
D) none of the options 
A) to prevent large important balance sheet accounts,carried at historical values,from having insignificant values once translated into the reporting currency at the current rate. 
B) to prevent games playing in the accounting books. 
C) to prevent having to restate the books at a later date. 
D) none of the options

Question 15

In implementing FASB 52,

Accepted Answer

A) the functional currency of the foreign entity must be translated into the reporting currency in which the consolidated statements are reported. 
B) the local currency of a foreign entity may not always be its functional currency.If it is not,the temporal method of translation is used to remeasure the foreign entity's books into the functional currency. 
C) the current rate method is used to translate from the functional currency to the reporting currency. 
D) in some cases,a foreign entity's functional currency may be the same as the reporting currency,in which case translation is not necessary. 
A) the functional currency of the foreign entity must be translated into the reporting currency in which the consolidated statements are reported. 
B) the local currency of a foreign entity may not always be its functional currency.If it is not,the temporal method of translation is used to remeasure the foreign entity's books into the functional currency. 
C) the current rate method is used to translate from the functional currency to the reporting currency. 
D) in some cases,a foreign entity's functional currency may be the same as the reporting currency,in which case translation is not necessary.

Question 16

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Accepted Answer

A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the options 
A) transaction exposure. 
B) translation exposure. 
C) economic exposure. 
D) none of the options

Question 17

Under the monetary/nonmonetary method,revenue and expense items associated with nonmonetary accounts,such as cost of goods sold and depreciation,are translated at the historical rate associated with the balance sheet account.

Accepted Answer

A) True 
 B)False

Question 18

The actual translation process prescribed by FASB 52 is

Accepted Answer

A) a two-stage process. 
B) a twelve-step program. 
C) a five-step process. 
D) none of the options 
A) a two-stage process. 
B) a twelve-step program. 
C) a five-step process. 
D) none of the options

Question 19

Which of the following is a translation method where a "plug" equity account,called cumulative translation adjustment,is used?

Accepted Answer

A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method 
A) Current/noncurrent method 
B) Current rate method 
C) Current/future method 
D) Short/long term method

Question 20

When using the current/noncurrent method,

Accepted Answer

A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the options 
A) most income statement items are translated at the average exchange rate for the accounting period. 
B) revenue and expense items that are associated with noncurrent assets or liabilities are translated at the historical rate that applies to the applicable balance sheet items. 
C) depreciation expense is translated at the historical rate that applies to the applicable depreciable asset items. 
D) all of the options

Exam 10: Management of Translation Exposure

According to the monetary/nonmonetary method,monetary balance sheet accounts include

The "functional currency" is defined in FASB 52 as

What does it mean to have redenominated an asset in terms of the dollar?

Translation exposure refers to

A balance sheet hedge seeks to

The generally accepted method for consolidating the financial reports of an MNC from the 1930s to 1975 was the

Using the temporal method,monetary accounts,such as cash,

When determining the functional currency,

When exchange rates change,the value of a foreign subsidiary's assets and liabilities that are denominated in a foreign currency change

The difference between accounting exposure and translation exposure is that

The extent to which the value of the firm would be affected by expected changes in the exchange rate is

The simplest of all translation methods to apply is

The International Accounting Standards Committee

In highly inflationary economies,FASB 52 requires that the foreign entities financial statement be remeasured from the local currency "as if the functional currency were the reporting currency." The purpose of this requirement is

In implementing FASB 52,

The extent to which the value of the firm would be affected by unexpected changes in the exchange rate is

Under the monetary/nonmonetary method,revenue and expense items associated with nonmonetary accounts,such as cost of goods sold and depreciation,are translated at the historical rate associated with the balance sheet account.

The actual translation process prescribed by FASB 52 is

Which of the following is a translation method where a "plug" equity account,called cumulative translation adjustment,is used?

When using the current/noncurrent method,

International Monetary System

Globalization and the Multinational Firm

Balance of Payments

Corporate Governance Around the World

The Market for Foreign Exchange

International Parity Relationships and Forecasting Foreign Exchange Rates

Futures and Options on Foreign Exchange

Management of Transaction Exposure

Management of Economic Exposure

International Banking and Money Market

International Bond Market

International Equity Markets

Interest Rate and Currency Swaps

International Portfolio Investment

Foreign Direct Investment and Cross-Border Acquisitions

International Capital Structure and the Cost of Capital

International Capital Budgeting

Multinational Cash Management

International Trade Finance

International Tax Environment and Transfer Pricing

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